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									           Case 1:08-cv-10612         Document 1         Filed 04/10/2008       Page 1 of 30



                              UNITED STATES DISTRICT COURT
                               DISTRICT OF MASSACHUSETTS


STEPHEN E. KELLER, Individually and
On Behalf of All Others Similarly Situated,
                                                  Civil Action No.
                 Plaintiff,

v.
                                                  CLASS ACTION COMPLAINT FOR
FIRST MARBLEHEAD CORPORATION,                     VIOLATIONS OF FEDERAL
INC., JACK KOPNISKY, DONALD R.                    SECURITIES LAW
PECK, JOHN HUPALO, PETER TARR
and STEPHEN ANBINDER
            Defendants.
                                                  JURY TRIAL DEMANDED


                   FEDERAL SECURITIES CLASS ACTION COMPLAINT

          Plaintiff, Stephen E. Keller individually and on behalf of all other persons similarly

situated, by the undersigned attorneys, for its Class Action Complaint, alleges upon personal

knowledge as to itself and its own acts, and upon information and belief as to all other matters,

based on the investigation conducted by and through its attorneys, which included, among other

things, a review of the defendants' public documents, conference calls and announcements,

Securities and Exchange Commission ("SEC") filings, wire and press releases published by and

regarding First Marblehead Corporation Inc. ("First Marblehead," "FMD" or the "Company"),

securities analysts' reports and advisories about the Company, and information readily

obtainable on the internet.

                                    NATURE OF THE ACTION

            1.   Plaintiff brings this action as a class action on behalf of itself and all other persons

     who purchased securities of First Marblehead Corporation during the period August 10, 2006

     through April 7, 2008 (the "Class Period") and who were damaged thereby , seeking to recover
         Case 1:08-cv-10612          Document 1       Filed 04/10/2008       Page 2 of 30



  damages caused by defendants ' violations of the Securities Exchange Act of 1934 (the

 "Exchange Act")

            2.   First Marblehead Corporation, which is headquartered in Boston, Massachusetts,

 is a company that engages in various services relating to the underwriting, packaging and

  securitization of student loans.

            3.   The Education Resources Institute ("TERI"), a private 501(c)(3) non-profit

  organization, operated from First Marblehead's office space, is engaged in, among other

 things, guaranteeing student loans originated by First Marblehead.

       4.        In its press releases, SEC filings and other public statements disseminated during

the Class Period, Defendants made materially false and misleading statements, and/or omitted

material facts necessary to make those statements not misleading, concerning the performance

and quality of First Marblehead's securitizations, its ability to perform additional securitizations,

TERI's ability to adequately guarantee FMD's student loans and the Company's financial results

and its ongoing operations.

       5.        Throughout the Class Period, and prior to the start of the Class Period, default

rates for student loans taken out to pay for "for profit" colleges were rising at rates much higher

than other student loans. First Marblehead misrepresented the level of default rates in its

portfolio and its effect on its ability to securitize additional student loan underwritings. In

addition, Defendants knew, or reckless disregarded that TERI was under-reserved and unable to

adequately insure the student loans underwritten by First Marblehead.

       6.        Even though it knew or was reckless in not knowing about the worsening

performance of its student loans, securitizations and TERI, the Company continued to tout its

ability to complete additional securitizations.




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         Case 1:08-cv-10612          Document 1       Filed 04/10/2008         Page 3 of 30



       7.         The Company also represented that it would consult with credit rating agencies

periodically before TERI made any reductions to the amount of escrow funds maintained to

guarantee the student loans underlying FMD securitizations. However, the Company allowed

TERI to reduce the amount of escrow funds on multiple occasions without consulting with the

rating agencies. This eventually resulted in Moody's Investor Services ("Moody's"), a credit

rating agency, placing TERI under review for a possible downgrade and TERI's eventual

bankruptcy.

       8.         Defendants' representations about the performance of the Company's student loan

securitizations, First Marblehead's prospects for completing additional securitizations and

TERI's ability to maintain its credit rating were false and misleading and had the effect of

artificially inflating the Company's share price throughout the Class Period.

            9.    The truth concerning First Marblehead's       ability   to    complete   additional

 securitizations , issues surrounding the increases in default rates and TERI' s lack of adequate

 loss reserves was partially revealed after the close of the market on December 3, and the

 morning of December 4, 2007. FMD's stock price plunged almost 37% from its close on

 December 3, 2007 to its close on December 7, 2007, when it announced it would not securitize

 any loans in its 2008 fiscal second quarter.

            10.   The truth concerning TERI' s absolute inability to meet its loan guarantee

 obligations was finally revealed after the close of markets on April 7, 2008, when it was

 reported that TERI filed for bankruptcy protection in Boston, Massachusetts. Accordingly,

 First Marblehead may incur losses from any loan defaults. As a result of TERI's bankruptcy

 filing, FMD stock price again plummeted 36.88% from its close on April 7, 2008 to its close

 on April 8, 2008




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                                JURISDICTION AND VENUE

        11.    The claims asserted herein arise under and pursuant to Sections 10(b), and 20(a)

of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a) and Rule 10b-5 promulgated thereunder by

the SEC, 17 C.F.R. § 240.1Ob-5.

        12.    This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331 and 1337 and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

        13.    Venue is proper in this District pursuant to Section 27 of the Exchange Act, and

28 U.S.C. § 1391(b). First Marblehead maintains businesses in this District and many of the acts

and practices complained of herein occurred in substantial part in this District. In addition, the

Company's principal executive offices are in this District.

        14.    In connection with the acts alleged in this complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

limited to, the United States mails, interstate telephone communications and the facilities of the

national securities markets.

                                            PARTIES

        15.    Plaintiff, as set forth in the accompanying certification, incorporated by reference

herein, purchased the common stock of First Marblehead Corporation at artificially inflated

prices during the Class Period and has been damaged thereby.

        16.    FMD is incorporated as a business corporation under the laws of the state of

Delaware and its principal place of business is located at 800 Boylston Street on the 34th Floor in

Boston, Massachusetts. FMD provides a range of services relating to the outsourcing,

underwriting and securitization of private student loans. It assists national and regional financial

institutions and educational institutions, as well as businesses, education loan marketers and



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        Case 1:08-cv-10612          Document 1       Filed 04/10/2008     Page 5 of 30



other enterprises with the design, implementation and securitization of student loan programs.

The Company is engaged in program design and marketing coordination, borrower inquiry and

application, loan origination and disbursement, loan securitization, and loan servicing. On

November 30, 2006, the Company completed the acquisition of Union Federal Savings Bank, a

community savings bank located in North Providence, Rhode Island.

       17.    The Company conducts its business through its eight direct or indirect

subsidiaries, First Marblehead Education Resources Inc., GATE Holdings, Inc., The National

Collegiate Funding LLC, First Marblehead Data Services, Inc., First Marblehead Securities

Corporation I and II, TERI Marketing Services, Inc., Union Federal Savings Bank and UFSB

Private Loan SPV, LLC. The Company's common stock is listed on the New York Stock

Exchange ("NYSE") under the symbol "FMD".

       18.    Jack Kopnisky has been FMD's President and Chief Operating Officer since

September 6, 2005 and Chief Executive Officer since September 27, 2005.

       19.    Donald R. Peck was FMD's Executive Vice President and Chief Financial Officer

beginning April 2003, Treasurer beginning July 2003 and Secretary beginning November 2004.

He resigned all of these positions on November 1, 2006.

       20.    John Hupalo, has served as FMD's Executive Vice President and Group Head,

Capital Markets since March 2003.

       21.    Peter Tarr has served as FMD's General Counsel since July 2005 and as

Chairman of the Board of Directors since October 2005. Mr. Tarr served as Vice Chairman of

the Board of Directors from August 2005 until his election as Chairman.

       22.    Stephen Anbinder is a co-founder and Director of FMD and served as Vice

Chairman of the board of directors from May 2002 until June 2006. Mr. Anbinder previously




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served as FM's President, from December 1995 to May 2002, and Treasurer, from May 2002

to June 2003.

       23.      Defendants Kopnisky, Peck, Hupalo, Tarr and Anbinder are collectively referred

to as the "Individual Defendants."

       24.      As officers and controlling persons of a publicly -held company , registered with

the SEC and traded on the NYSE, the Individual Defendants each had a duty to disseminate

accurate and truthful information with respect to the Company's financial condition, liabilities,

interests, earnings and present and future business prospects, and to correct any previously issued

statements that were erroneous.

       25.      The Individual Defendants , because of their positions as officers and/or directors

of the Company, were able to and did control the content of the various SEC filings, press

releases and other public statements pertaining to the Company during the Class Period.

Accordingly, each of the Individual Defendants is responsible for the accuracy of the public

filings, press releases and other Company statements as detailed herein and are personally liable

for the misrepresentations and omissions contained therein.

                               CLASS ACTION ALLEGATIONS

       26.      Plaintiff brings this action as a class action pursuant to Federal Rules of Civil

Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons who acquired FMD

common stock from August 10, 2006 through April 7, 2008 , and who were damaged thereby (the

"Class"). Excluded from the Class are the defendants, the Company's officers and directors,

affiliates, legal representatives, heirs, predecessors , successors and assigns, and any other entity

in which any of the defendants has a controlling interest or of which the Company is a parent or

subsidiary.




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            Case 1:08-cv-10612       Document 1         Filed 04/10/2008       Page 7 of 30



        27.      The members of the Class are located in geographically diverse areas and are so

numerous that joinder of all members is impracticable.            Throughout the Class Period, the

Company had more than 93.5 million shares of its common stock outstanding, which were

actively traded on the NYSE. While the exact number of Class Members is unknown at this time

and can only be ascertained through appropriate discovery, Plaintiff believes there are thousands

of members of the Class who traded Company common stock during the Class Period.

        28.      Common questions of law and fact exist as to all members of the Class and

predominate over any questions affecting solely individual members of the Class. Among the

questions of law and fact common to the Class are:


        •       Whether defendants violated federal securities laws based upon the
                facts alleged herein;
        •       Whether defendants acted knowingly or recklessly in making
                materially misleading statements and/or omissions during the Class
                Period;
        •       Whether the market prices of the Company's securities during the
                Class Period were artificially inflated because of defendants'
                conduct complained of herein; and
        •       Whether the members of the Class have sustained damages and, if
                so, the proper measure of damages.


        29.     Plaintiff's claims are typical of the claims of the members of the Class as Plaintiff

and members of the Class sustained damages arising out of Defendants' wrongful conduct in

violation of federal laws as complained of herein.

        30.     Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

Plaintiff has no interests antagonistic to or in conflict with those of the Class.

        31.     A class action is superior to other available methods for the fair and efficient

adjudication of this controversy since joinder of all members of this Class is impracticable.


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            Case 1:08-cv-10612       Document 1        Filed 04/10/2008       Page 8 of 30



Furthermore, because the damages suffered by individual Class members may be relatively

small, the expense and burden of individual litigation make it impossible for the Class members

individually to redress the wrongs done to them. There will be no difficulty in the management

of this action as a class action.

        32.     Plaintiff will rely, in part, upon the presumption of reliance established by the

fraud-on-the-market doctrine in that:


        •        defendants failed to disclose material facts during the Class Period;
        •       FM's stock met the requirements for listing, and was listed and
                actively traded on the NYSE, a highly efficient and automated
                market;
        •        as a regulated issuer, FMD filed periodic public reports with the SEC
                 and the NYSE;
        •       FMD regularly communicated with public investors via established
                market communication mechanisms, including through regular
                dissemination of press releases on the national circuits of major
                newswire services and through other wide-ranging public
                disclosures, such as communications with the financial press and
                other similar reporting services;
        •       FAM was followed by securities analysts employed by major
                brokerage firms who wrote reports which were distributed to the
                sales force and certain customers of their respective brokerage firms.
                Each of these reports was publicly available and entered the public
                marketplace;
        •       the misleading statements and omissions alleged would tend to
                induce a reasonable investor to misjudge the value of the Company's
                securities; and
        •       Plaintiff and members of the Class purchased their Company stock
                between the time Defendants failed to disclose material facts and the
                time the true facts were disclosed, without knowledge of the omitted
                facts.
        33.     Based upon the foregoing, Plaintiff and members of the Class are entitled to a

presumption of reliance upon the integrity of the market price for the Company's securities.




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          Case 1:08-cv-10612            Document 1          Filed 04/10/2008   Page 9 of 30



                                   SUBSTANTIVE ALLEGATIONS

A.      About First Marblehead Corporation and its Key Relationships

        34.      Defendant First Marblehead purports to be an industry leader in providing

services for private, non-governmental , education lending in the United States .' The Company

works with banks and other loan providers by marketing lending services to students, processing

loan applications, completing loan documentation, obtaining insurance on loans, packaging loans

together, securitizing groups of loans, selling the newly created student loan securities and

administering the securitizations.

        35.      First Marblehead relies on several revenue streams including: structural advisory

fees, which are fees earned in connection with structuring securitizations on behalf of its clients;

residuals, which are junior debt interests in the securitizations it structures; processing fees from

TERI, which are reimbursements of direct costs incurred with providing outsourced services to

TERI; and administrative and other fees.

        36.      On September 12, 2006, the Company filed its Form 10-K for the fiscal year

ending June 30, 2006 (`2006 Form 10-K"), which stated in pertinent part:

                 Our level of profitability depends on our ability to earn structural advisory fees
                 and residuals from facilitating securitizations of private label and GATE loans.
                 We may in the future enter into arrangements with private label lenders under
                 which we provide outsourcing services but do not have the exclusive right to
                 securitize the loans that they originate. We also receive fees as the administrator
                 of the trusts that have purchased the private label and GATE loans, and in this
                 capacity monitor the performance of the loan servicers. (emphasis added)


        37.      FMD's 2006 Form 10-K was signed and certified by Jack Kopnisky and Donald

Peck and signed by Peter Tarr and Stephen Anbinder. In the 10-K, FMD acknowledged that an

increase in default rates and/or a downgrade of its credit rating would have a material adverse


1 http://www.firstmarblehead.com/altemative-education-loans/index.hhnl


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        Case 1:08-cv-10612          Document 1        Filed 04/10/2008      Page 10 of 30



affect on its business and operations.

               A number offactors, some of which are beyond our control, may adversely
               affect our securitization activities and thereby adversely affect our results of
               operations.
               Our financial performance and future growth depend in part on our continued
               success in structuring securitizations. Several factors may affect both our ability
               to structure securitizations and the revenue we generate for providing our
               structural advisory and other services, including the following:
               •   degradation of the credit quality or performance of the loan portfolios of the
                   trusts we structure, which could reduce or eliminate investor demand for
                   future securitizations that we facilitate..;
               •   any material downgrading or withdrawal of ratings given to securities
                   previously issued in securitizations that we structured, or any occurrence of an
                   event of default with respect to such securities, which could reduce demand
                   for additional securitizations that we structure.
       38.     Factors that FMD discloses as materially affecting its financial results are: the

demand for private education financing; the competition for providing private education

financing; the education financing preferences of students and their families; applicable laws and

regulations, which may affect the terms upon which our clients agree to make private student

loans and the cost and complexity of our loan facilitation operations; the private student loan

securitization market, including the costs or availability of financing; the general interest rate

environment, including its effect on our discount rates; borrower default rates; and prepayment

rates on private student loans, including prepayments through loan consolidation.

       39.     The First Marblehead Corporation considers five assumptions when assessing the

performance of its securitizations: discount rates, prepayment rates, trends in interest rates,

default rates and recovery rates.

       40.     FMD has several key relationships that it relies upon for continued business

growth and success. One of these companies is TERI, which provides guarantees on student

loans pursuant to which TERI agrees to reimburse lenders for all unpaid principal and interest on

defaulted student loans, in exchange for a fee based on the loan type and risk profile of the


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         Case 1:08-cv-10612          Document 1        Filed 04/10/2008     Page 11 of 30



borrower.

        41.     FMD has intimate knowledge of and assists TERI with its loan guarantee

business . FMD purchased TERI' s operating assets in 2001, and at a minimum performs various

guarantee business functions on behalf of TERI and may manage all aspect of that business.

According to various materials FMD has made available to the public, it will "manage TERI

portfolio risk profile and recommend guarantee fee structure," provide " default management

services," perform "default prevention, default processing and administrative services," and

"guarantee claims management and administrative services.2"

        42.     In FMD's 2006 Form 10-K, the Company, in one instance, describes its

relationship with TERI as follows:

                In 2001, we entered into a strategic relationship with TERI, intended to enhance
                significantly our risk management and loan processing capabilities. We acquired
                TERI's historical database and loan processing operations, but not its investment
                assets or guarantee liabilities. In addition, 161 members of TERI's staff became
                our employees. TERI remains, however, an independent, private not-for-profit
                organization with its own management and board of directors...
                ...In connection with the transaction, we also entered into a series of agreements
                with respect to loan processing services, database updates and the securitization of
                TERI-guaranteed loans . These include a master servicing agreement and a
                database purchase and supplementation agreement with TERI. Pursuant to the
                master servicing agreement, TERI engages us to provide loan origination, pre-
                claims, claims and default management services.


        43.     Pursuant to its agreements with FMD and other parties to the student loans it

guarantees, TERI is required to maintain an escrow or "Pledged Account" to secure TERI's

obligation to purchase defaulted student loans . TERI is permitted to keep a portion of guaranty

fees as an administrative fee rather than place them in the Pledged Account.




2 Master Service Agreement


                                                  11
reduce the amount of funds in the Pledged Account below a set level (this level was redacted

from the public filings), and "FMC agrees to consult with the Rating Agencies from time to time

regarding reduction of such percentage below [**] and to cause such reduction to be included in

the terms of future Securitization Transactions to the extent that it can be effected without

adverse effect upon either the credit rating or the financial terms of such transactions."

       45.     Accordingly, excessive reduction in the amount of funds deposited into the

Pledged Accounts would adversely affect TERI's credit rating or the financial terms of its

securitization transactions.

       46.     FMD also has key relationships with lender banks, which provide financing for

FMD's student loan activities. One of these relationships is with Bank of America.

       47.     In its 2006 Form 10-K, FMD discusses the possible effect of a TERI downgrade

on its relationships with lender banks:

               Our business could be adversely affected if TERI ' s ratings are downgraded.
               In its role as guarantor in the private education lending market, TERI agrees to
               reimburse lenders for unpaid principal and interest on defaulted loans. TERI is the
               exclusive provider of borrower default guarantees for our clients' private label
               loans. As of June 30, 2006, TERI had a Baa3 counterparty rating from Moody's
               Investors Service, which is the lowest investment grade rating, and an insurer
               financial strength rating of A+ from Fitch Ratings. If these ratings are lowered,
               our clients may not wish to enter into guarantee arrangements with TERI. In
               addition, we may receive lower structural advisory fees because the costs of
               obtaining financial guarantee insurance for the asset-backed securitizations that
               we structure could increase. Finally, the inability of TERI as student loan
               guarantor to meet its guaranty obligations could reduce the amount of principal or
               interest paid to the holders of asset-backed securities, which could adversely
               affect our residual interests in securitization trusts or harm our ability to structure
               securitizations in the future. In each such case, our business would be adversely
               affected.

       48.     At least as early as March 31, 2006, First Marblehead knew or was reckless in not

knowing that total student loan delinquency rates within its securitizations had increased more


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        Case 1:08-cv-10612         Document 1         Filed 04/10/2008     Page 13 of 30




       49.     At least as early as March 31, 2006, First Marblehead knew or was reckless in not

knowing that its cumulative default rate net of claims cancelled for its securitizations had

increased between three and thirty times over the past year for each of the securitizations for

which there was a full year of data.

                          Materially False and Misleading Statements
                                Issued During the Class Period

       50.     On August 10, 2006, FMD hosted a conference call where Donald R. Peck,

reiterated that the securitizations were performing well:

               We do anticipate that there will be some volatility and residual valuations from
               quarter to quarter, potentially up or down, as the timing of prepayments, defaults,
               and recoveries varies from how they are modeled for a particular quarter. The
               trusts continue, generally, to perform consistent with our expectations, as they
               have all year, and we have not altered our assumptions regarding future
               prepayments, defaults, and recoveries . As with all of our assumptions, we will
               continue to monitor trust performance, and we will make appropriate adjustments
               as circumstances warrant. (emphasis added)

       51.     According to FMD's September 12, 2006 Form 10-K:

               Except for the change to the discount rate applied to additional structural advisory
               fees to account for the change in the market rate of 10-year U.S. Treasury Notes,
               we did not materially change any loan performance assumptions regarding default
               rates , recovery rates or discount rates in valuing projected trust cash flows during
               fiscal 2006 or fiscal 2005.

               During the second quarter of fiscal 2006, we increased our estimate of the fair
               value of structural advisory fees by approximately $0.5 million and increased our
               estimate of the fair value of residuals receivables by approximately $3.1 million
               as a result of refinements to our prepayment rate assumptions and use of an
               enhanced cash flow model. During the fourth quarter of fiscal 2006, loans in the
               securitization trusts experienced higher prepayment rates than we had estimated
               would occur during this period of time, which reduced the positive net accretion
               that comes from updating the carrying value of our structural advisory fees and
               residuals receivables for the passage of time. We do not believe it is necessary at
               this time to alter our assumptions regarding future prepayments that we use to



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               estimate the fair value of these receivables. We continue to monitor the
               performance of trust assets against our expectations, and will make such
               adjustments to our estimates as we believe are necessary to value properly our
               receivables balance at each balance sheet date. (emphasis added)

        52.    In its 2006 Form 10-K, FMD acknowledged that it had agreed to allow TERI to

reduce the funds deposited into the Pledged Account:

               In October 2005, we entered into a supplement to the master loan guaranty
               agreement. Under the terms of the 2005 supplement, for securitizations of TERI-
               guaranteed loans during fiscal 2006, TERI's administrative fee of 150 basis points
               increased, and the amount deposited by TERI into the pledged account decreased,
               by 90 basis points. In addition, TERI's residual interest in the trusts created at the
               time of the securitizations was correspondingly reduced to account for the 90
               basis point reduction in the pledged account. As a result, the administrative fee for
               securitizations of TERI-guaranteed loans in fiscal 2006 was 240 basis points
               multiplied by the principal balance of the loans originated and securitized. For
               securitizations completed during fiscal 2006, TERI's ownership of the residual
               value of the TERI-guaranteed loans securitized ranged from 12 to 15 percent.
               In August 2006, we entered into a supplement to the master loan guaranty
               agreement that provides as follows:
               For each securitization closing between August 1, 2006 and June 30, 2007, TERI
               will be entitled to elect to adjust the amount of its administrative fee, and adjust
               the amount deposited into the pledged account, within specified parameters. As a
               result, the amount of the administrative fee applicable to securitizations closing
               between August 1, 2006 and June 30, 2007 may range from 150 basis points to
               240 basis points, at TERI's election. We have agreed to attempt in good faith to
               structure our securitization transactions to accommodate TERI's election.


        53.    Implicit in FMD's agreement to allow TERI to reduce the funds deposited into the

Pledged Account, was the Company's prior agreement to consult with ratings agencies regarding

such reductions and to avoid any adverse effect upon either the credit rating or the financial

terms of the transaction.

        54.    During a conference call FMD hosted on October 26, 2006, the following

exchange occurred:

               <Q> On the forbearance data, can you just let us know how that's tracking relative
               to your expectations and how - what is the duration of a loan that's in forbearance
               before it either becomes a delinquency or is secured?


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        Case 1:08-cv-10612        Document 1        Filed 04/10/2008      Page 15 of 30




              <A - Jack Kopnisky>: Well, I can. What we see generally is there are two
              opportunities there in the 20 year period to seek a forbearance. And each
              forbearance period lasts up to six months. In detail, what we see is that - the
              forbearance is not as required for delinquency and indeed many students generally
              take up forbearance right after they get out of college and pass through their grace
              period, they need some more time to get their feet under them and indeed they
              become very good payers after they come out of forbearance.

               <Q>: And how are these numbers tracking relative to your expectations and
               rpice?

               <A - Jack Kopnisky>: It's spot on.

       55.    During a conference call hosted by FMD on January 25, 2007, the following

exchange occurred:

              <Q >: The default rate on that or the gross default rate is up to 531, which I
              assume is compare or your overall is 9% for the entire life of the loan. Like is that
              basically in line with your assumptions at this point even though the pool is
              basically only two years old?

              <A - John Hupalo>: Let me -- I will make a general statement and that applies
              to that particular trust. When we have gone back and looked at each one of the
              five drivers including the default rates, we have found that they are in line with
              what our expectation is for this point in their development. I think your point
              though about any particular trust it's really important. There are some variations
              trust-to-trust with regards to some performance, either prepayment performance
              or credit performance or recovery performance, whatever it might be. And we do
              monitor that carefully to run it against what our expectation is. (emphasis added)

       56.     On April 26, 2007, the Company issued a press release announcing its financial

results for its third quarter of fiscal year 2007 with an accompanying Form 8 -K (April 26, 2007

Form 8-K). Notably, in its announcement, the Company announced changes in its expectations

(assumptions) only regarding prepayment rates, but not default or forbearance rates:

              The operating results also reflect adjustments to certain of the assumptions used
              by the company in estimating the value of its service receivables. Based on the
              current interest rate environment and securitization market, the company
              adjusted its prepayment and discount rate assumptions. The net effect of these
              adjustments reduced service receivables as well as the quarter's securitization
              revenues by a total of $16 million, or $.11 per diluted share.



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        57.     The April 26, 2007 Form 8-K was signed by John Hupalo.

        58.     During a conference call on April 26, 2007, Jack L. Kopnisky, President, Chief

Operating Officer and Chief Executive officer acknowledged that FMD had changed its

assumptions on only two elements, prepayments rate and discount rate:

                Since our IPO in 2003 investors have heard First Marblehead consistently speak
                about the package of five key assumptions, which we outline on the next slide.
                They are default performance, discount rate, interest rates, prepayment
                performance and recovery performance. We have talked about them as a package
                because we firmly believe that this is the most appropriate way for investors to
                gain insight into how the company determines the fair value for our service
                receivables. It would be a mistake and potentially misleading to isolate one
                assumption without considering the correlations and the effects across all the
                other assumptions.

                To arrive at a fair value we consistently consider a number of factors including
                but not limited to trends in the underlying loan portfolio; macroeconomic
                conditions; the immediate past, current and projected interest rate environment;
                the effect of the passage of time; and attributes unique to student loans. These
                attributes when combined with the 20-year repayment terms that include
                forbearance and deferment periods drive any decision to modify our assumption
                package. Using this methodology we determined it appropriate to increase the
                prepayment assumption from 7% to 8% and to modify the discount rate
                calculation used to value our residuals.

        59.     After the close of the markets on August 8, 2007, FMD issued a press release

relating to its fourth quarter of fiscal year 2007 and filed a Form 8-K on August 9, 2007, that

stated in relevant part:

                Total revenues for the fiscal year ended June 30, 2007 were $881 million, up
                55% from $569 million for the same period last year. Net income increased
                57% for the fiscal year to $371 million, or $3.92 per diluted share.

                "Fiscal 2007 was the strongest year in First Marblehead's history. Our focus on
                adding value to our clients has resulted in exceptional revenue, earnings, and EPS
                growth ," said Jack L. Kopnisky, First Marblehead's President and Chief
                Executive Officer. "We processed a record 1.4 million loan applications resulting
                in $4.3 billion in student loans facilitated. Our business continues to grow as we
                remain focused on developing financial solutions to help students achieve their
                dreams."




                                                16
        Case 1:08-cv-10612       Document 1         Filed 04/10/2008      Page 17 of 30



              For the fourth quarter of fiscal 2007, total revenues were $200 million, up 33%
              from $150 million for the same period last year. Operating income for the fourth
              quarter was $132 million, an increase of 31% over the same period last year.
              For the fourth quarter, net income was $78 million or $0.83 per diluted share.

              The volume of loans facilitated during the fourth quarter of fiscal 2007 that are
              available for securitization increased 39% over the same period last year to
              $792 million. The rolling twelve-month volume of loans available for
              securitization increased 33% to $3.9 billion for the twelve months ended June
              30, 2007. (emphasis added)

       60.    The August 9, 2007 Form 8-K was signed by John Hupalo

       61.    On August 8, 2007, FMD hosted an earnings conference call during which John

Hupalo, Senior EVP and CFO stated in relevant part:

              The assumptions we use for the other four valuation drivers, defaults, recoveries,
              interest rates, and the discount rate, also remain appropriate. In aggregate, the
              portfolio continues to perform well. In light of the turmoil in the residential
              mortgage market, this is a good time to reemphasize that our clients and our
              business is not focused on down credit, sub prime borrowers the way some of the
              mortgage lenders structured their businesses. They specifically created businesses
              to serve credit challenged customers. We did not. The trust loans, we remind
              everyone, are guarantee[d] against default [by an] investment-grade guarantor, the
              Education Resources Institute. More than 80% of our portfolio is cosigned. The
              typical cosigner's credit profile is very strong. They are 50 years old, have been
              on active credit file for 22 years, so they have been through a variety and number
              of economic cycles. 85% of them own their own homes. The credit characteristics
              of the pool remain strong. (emphasis added)

       62.    During the August 8, 2007 conference call, Jack Kopnisky, President, Chief

Operating Officer and Chief Executive officer, discussed the Company's increased focus on the

direct to consumer channel:


              Our fourth quarter volume growth was exceptional with loans available for
              securitization increasing 39% over the same period last year. During the quarter,
              loans available for securitization through the direct to consumer channel increased
              49% while school channel loan volume decreased by 3% over the same period
              last year. Over the past 12 months, our loan volumes available for securitization
              have shown increases of 44% and 10% in direct to consumer and school channel
              volume, respectively.




                                               17
        Case 1:08-cv-10612        Document 1        Filed 04/10/2008       Page 18 of 30



              In the year ended June 30th, the mix of direct to consumer to school channel
              available for securitization was 79% to 21%. We continued to see increasing
              consumer demand as borrowers seek a range of options in a direct relationship.
              However, the school channel remains an important and viable growth channel,
              where we will continue to allocate meaningful resources. As of the end of June,
              we had $832 million of loans available for securitization that had not yet been
              securitized. For the year, we securitized $3.75 billion of private student loans. The
              blended yield was over 18% with approximately $457 million coming in the form
              of upfront cash at the time of closing. Investor demand in our securitization
              program has been diverse and strong. Also, during the quarter, our Board
              increased the quarterly cash dividend to $0.25 per share from $0.15, an increase
              of 67%. This was the fourth consecutive quarterly increase and represents a 94%
              increase in full-year dividends for fiscal year 2007, $0.62 per share compared to
              $0.32 per share on a split adjusted basis.

       63.    On August 28, 2007, the Company filed its Form 10-K for the fiscal year ending

June 30, 2007 (`2007 Form 10-K"), which discussed reductions in the amount of funds deposited

by TERI into the Pledged Account:

              TERI received an administrative fee of 175 basis points for the securitization
              transaction the Company completed in the first quarter of fiscal 2007, 221 basis
              points for the securitization transaction the Company completed in the second
              quarter of fiscal 2007, 215 basis points for the securitization transaction the
              Company completed for the third quarter of fiscal 2007 and 212 basis points for
              the securitization transaction the Company completed in the fourth quarter of
              fiscal 2007. The Company expects to allow TERI to elect to adjust the amount of
              its administrative fee, and adjust the amount deposited into the pledged account,
              within specified parameters for the securitization transaction the Company plans
              to complete in the first quarter of fiscal 2008.


       64.    In its 2007 Form 10-K, FMD also discusses the possible effect of a TERI

downgrade on its relationships with lender banks:

              Our business could be adversely affected if TERI 's ratings are downgraded.
              In its role as guarantor in the private education lending market, TERI agrees to
              reimburse lenders for unpaid principal and interest on defaulted loans. TERI is the
              exclusive provider of borrower default guarantees for our clients' private label
              loans. As of June 30, 2007, TERI had a Baa3 counterparty rating from Moody's
              Investors Service, which is the lowest investment grade rating, and an insurer
              financial strength rating of A+ from Fitch Ratings which was reaffirmed on
              April 2, 2007. TERI also held a rating of A from Dominion Bond Rating Service
              as of June 30, 2007. If TERI's ratings were downgraded, our clients may not wish
              to enter into guarantee arrangements with TERI, our upfront structural advisory


                                               18
        Case 1:08-cv-10612        Document 1        Filed 04/10/2008      Page 19 of 30



               fee yields could decline, or market conditions could dictate that we obtain
               additional credit enhancement for the asset-backed securitizations that we
               structure, the cost of which could result in lower revenues. In addition, the
               inability of TERI as student loan guarantor to meet its guaranty obligations could
               reduce the amount of principal or interest paid to the holders of asset-backed
               securities, which could adversely affect our residual interests in securitization
               trusts or harm our ability to structure securitizations in the future. Finally, if
               TERI's ratings were downgraded below the ratings TERI held in January 2003, or
               if a rating agency were to place a negative watch on TERI, our agreement with
               Bank of America relating to the purchase of direct-to-consumer loans could be
               terminated. In January 2003, TERI had a Baa3 counterparty rating from Moody's
               Investors Service and an insurer financial strength rating of A from Fitch Ratings.
               If TERI experiences a material adverse financial change such as a reduction of its
               credit rating below investment grade, Bank of America could suspend the
               processing of new application for school channel loans. In each such case, our
               business would be adversely affected. (emphasis added)

        65.    The 2007 Form 10-K was signed and certified by Jack Kopnisky and John

Hupalo. It was also signed by Stephen Anbinder.

        66.    Implicit in FMD's agreement to allow TERI to reduce the funds deposited into the

Pledged Account, was the Company's prior agreement to consult with ratings agencies regarding

such reductions and to avoid any adverse effect upon either the credit rating or the financial

terms of the transaction.

        67.    On October 24, 2007, FMD hosted an earnings conference call during which John

Hupalo, Senior EVP and CFO reflected upon how FMD portfolio's performance was as expected

and that FMD would be executing a new securitization in December:

               In aggregate, the portfolio continues to perform generally within the range of our
               expectations, and we continue to carefully monitor prepayments, defaults and
               recoveries . Although still elevated, prepayments have generally been trending
               favorably.

        68.    Also during the October 24, 2007 conference call, Mr. Hupalo stated in relevant

part:

               As we look forward to our next securitization, I'll repeat my comments from
               August. As we do at this stage of each transaction, we are currently considering a



                                               19
        Case 1:08-cv-10612        Document 1        Filed 04/10/2008       Page 20 of 30



              number of structures for our December transaction. Unless there are dramatic
              improvements in the markets over the next month, it is most likely that the
              December structure will look a lot like the very successful September transaction.

       69.    Mr. Hupalo also made the following statement during the October 24, 2007

conference call, without revealing the Company' s role in assisting TERI with its guarantee

business:

              Just for those who are not as familiar, the loans that we securitize are all
              guaranteed by TERI. And the mechanism, obviously has not changed over the
              years, such that we have a cash pledge fund for each one of the segregated trusts.
              And then we rely on TERI's guarantee beyond that.

              To your point though, we have been monitoring very closely the portfolio
              performance. As I said earlier, it remains within our expectation. And we're really
              monitoring some of the lower credit tiers with special attention. We talked in the
              past about our collection activities and what we're trying to do for default
              aversion programs. And that is beginning collection activity or supplemental
              collection activity at the 60 rather than the 90. And we're evaluating opportunities
              to begin some of the collection activity earlier for certain of the borrower
              populations. So we are looking at that.

              And then your point with regard to credit criteria, we are in the process of looking
              at adjusting certain credit criteria, just as we do periodically during the course of
              any credit cycle.

       70.    On October 25, 2007, Fitch Ratings downgraded TERI's "Insurer Financial

Strength" from A+ to A and changed its outlook from Stable to Negative. However, it was not

enough of a downgrade to jeopardize FMD's relationship with Bank of America.

       71.    Also on October 25, 2007, FMD issued a press release entitled, First Marblehead

Announces First Quarter Fiscal 2008 Results: Net Income up 20% and Loans Available for

Securitization Increase 46% for the Quarter:

              We are off to a great start to the fiscal year as a result of record volumes in the
              first quarter. This fiscal quarter's volume of private student loans facilitated and
              available for securitization exceeded all such volume for fiscal 2005," said Jack L.
              Kopnisky, First Marblehead's Chief Executive Officer and President. "Even in the
              midst of one of the most volatile credit cycles, we completed our largest
              securitization to date, providing market leadership and helping to increase the



                                               20
        Case 1:08-cv-10612          Document 1         Filed 04/10/2008         Page 21 of 30



                availability of private student loan financing.

        72.     With the October 25, 2007 press release , FMD filed a Form 8-K on October 25,

2007 that was signed by John Hupalo.

        73.     The Defendants' statements , identified in paragraphs 50 - 52, 54 - 56, 58, 59, 61

- 64, 67 - 69 and 71 were each materially false and misleading when made, because, among

other things:

                •      Defendants misrepresented the credit quality of the Company's portfolio,

                the Company's ability to manage the risk of its portfolio and the performance of

                the Company's securitizations, because rather than performing as expected, the

                Company's portfolio was experiencing consistently increasing default rates

                beyond those expected by the Company or able to be absorbed by the FMD

                securitizations or TERI;

                •      Defendants misrepresented the likelihood of the Company completing a

                securitization in the second quarter of its fiscal year 2008;

                •      Defendants concealed the Company's inability to manage the risk of

                TERI's portfolio, its failure to consult with rating agencies, TERI's inability to

                adequately guarantee FMD related loans and FMD's true role in managing

                TERI's affairs;

                •      Defendants failed to maintain adequate internal systems, procedures and

                controls such that the Company's officers and directors continued to represent

                that the Company's portfolio was performing as expected and would perform a

                securitization in the second quarter of 2008, allowed TERI to reduce the funds

                available to cover defaulted loans and failed to communicate sufficiently with




                                                  21
        Case 1:08-cv-10612         Document 1         Filed 04/10/2008         Page 22 of 30



               ratings agencies concerning the default risk of TERI's portfolio.

                                  The Truth Begins To Emerge

       74.     On November 26, 2007, Friedman Billings Ramsey analyst Matt Snowling

downgraded FMD to underperform and decreased FMD's price target, stating "given the lack of

unrestricted cash held by the guarantor, we believe the rating agencies and capital markets will

eventually begin requiring First Marblehead to provide more collateral in future securitizations,

impacting cash earnings." In reaction to this news, the Company's shares decreased in value

$2.90 per share or 9.6%, to close on November 26, 2007 at $27.10 per share, on moderate

trading (1.49 times the average volume of the previous seven days).

       75.     On December 4, 2007, Moody' s placed 16 FMD notes on review for possible

downgrade, stating "In particular, loans originated through the direct-to-consumer channel

appear to default at a significantly higher rate compared to loans originated through school

financial aid officers." In reaction to this news, the Company's shares decreased in value $3.32

per share or 11.7% to close on December 4' 2007 at $24.98.

       76.     In response to the Moody's review, after the close of markets on December 4,

2007, Sandler O'Neill issued a report regarding FMD and said the "likelihood of First

Marblehead completing a securitization in December is severely diminished" and "Deterioration

in credit performance of the loans in the trust could result in significantly lower upfront

structural advisory fees in future securitizations." In reaction to this news, the Company's shares

dropped $5.05 per share or 20.2% to close on December 5, 2007 at $19.93, on heavy trading

(3.43 times the average volume of the previous seven days).

       77.     On December 7, 2007, FMD announced it would not undertake a securitization

for its second quarter of fiscal 2008. The stock closed at $17.85 per share.




                                                 22
        Case 1:08-cv-10612          Document 1        Filed 04/10/2008      Page 23 of 30



       78.     After the close of markets on April 7, 2008, news reports revealed that TERI filed

for Chapter 11 bankruptcy protection in Boston Massachusetts. Friedman Billings Ramsey

analyst Matt Snowling issued a research note before the market opened on April 8, 2008, that

concluded that the bankruptcy filing means Boston -based First Marblehead may incur losses

from any defaults and the filing "now shifts credit risk back"' to First Marblehead. In reaction to

this news, the Company's shares dropped $2.84 per share or 36.88% to close on April 8, 2008 at

$4.86, on very heavy trading.

                         ADDITIONAL SCIENTER ALLEGATIONS

       79.     Defendants acted with scienter in that they knew that the statements issued or

disseminated in the name of the Company were materially false and misleading ; knew that such

statements or documents would be issued or disseminated to the investing public; and knowingly

and substantially participated in or acquiesced to the issuance or dissemination of such

statements or documents as primary violations of the federal securities laws. As set forth herein

in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding

the Company, their control over and/or their associations with the Company which made them

privy to confidential proprietary information concerning the Company, participated in the

fraudulent scheme alleged herein.

       80.     Defendants knew and/or recklessly disregarded the falsity and misleading nature

of the information that they caused to be disseminated to the investing public.       The ongoing

fraudulent scheme described could not have been perpetrated over a substantial period of time, as

described herein, without the knowledge and complicity of the personnel at the highest level of

the Company, including the Individual Defendants. The Individual Defendants were motivated to

materially misrepresent the true nature of the Company's business, operations, and financial




                                                 23
        Case 1:08-cv-10612            Document 1        Filed 04/10/2008     Page 24 of 30



affairs to the public and regulators in order to keep the Company's share price artificially high.

        81.        Defendants' misrepresentations related to First Marblehead's most important

revenue stream - securitizations , were motivated at least in part, by a hope that the increasing

delinquencies and cumulative default rates would right themselves and avoid the necessity of

changing Company expectations or require a costly disclosure that could have negative

implications on the Company's stock price and on its ability to perform additional

securitizations.

        82.        Defendants Kopinsky, Tarr and Hupalo were motivated to make the above

referenced misrepresentations, at least in part, by their desire to obtain additional compensation.

On August 20, 2007, the Company filed a Current Report on form 8-K, detailing the salaries,

performance awards and restricted stock options due to certain key employees, including inter

alia, Defendants Kopnisky, Tarr and Hupalo. The award totaled $2,500,000, $2,500,000 and

$1,000,000 respectively and was "keyed to the Corporation's income from operations for Fiscal

2007." The Current Report read in relevant part. :

                   Fiscal 2007 Annual Incentive Awards. Within the first 90 days of Fiscal 2007, the
                   Subcommittee selected the key employees eligible to receive annual incentive
                   awards under the Incentive Plan for Fiscal 2007 and allocated a maximum
                   incentive pool percentage under the Incentive Plan to each such employee. The
                   incentive pool under the Incentive Plan for Fiscal 2007 was keyed to the
                   Corporation's income from operations for Fiscal 2007. In making annual
                   incentive awards for Fiscal 2007, the Subcommittee had discretion to adjust the
                   previous incentive pool allocations downward but not upward and exercised its
                   discretion to lower the incentive pool allocations downward. Annual incentive
                   awards are intended to qualify as "performance-based" compensation under
                   Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section
                   162(m)"). The Subcommittee is composed entirely of "outside directors" within
                   the meaning of Section 162(m). (emphasis added)



                      THE SAFE HARBOR PROVISION IS INAPPLICABLE

        83.        The statutory safe harbor under the Private Securities Litigation Reform Act of



                                                   24
        Case 1:08-cv-10612         Document 1        Filed 04/10/2008      Page 25 of 30



1995, which applies to forward-looking statements under certain circumstances, does not apply

to any of the allegedly false statements pleaded in this complaint. The statements alleged to be

false and misleading herein all relate to then-existing facts and conditions. In addition, to the

extent certain of the statements alleged to be false may be characterized as forward-looking, they

were not adequately identified as "forward-looking statements" when made and there were no

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements . Alternatively, to the

extent that the statutory safe harbor is intended to apply to any forward-looking statements

pleaded herein, defendants are liable for those false forward-looking statements because, at the

time each of those forward-looking statements was made, the particular speaker had actual

knowledge that the particular forward-looking statement was materially false or misleading,

and/or the forward-looking statement was authorized and/or approved by an executive officer of

First Marblehead who knew that those statements were false, misleading, or omitted necessary

information when they were made.


                          LOSS CAUSATION / ECONOMIC LOSS

       84.     During the Class Period, as detailed herein, Defendants engaged in a scheme to

deceive the market and a course of conduct that artificially inflated the Company's common

stock price and operated as a fraud or deceit on acquirers of the Company's common stock by

continually overstating the quality of the Company's portfolio, the Company's past success and

ongoing ability to adequately manage its risky portfolio and the likelihood the Company would

successfully engage in future securitizations. As detailed above, when the truth about the

Company's portfolio and its ability to manage risk was revealed, the Company's common stock

declined as the prior artificial inflation came out of its common stock price. This decline in First



                                                25
        Case 1:08-cv-10612          Document 1        Filed 04/10/2008    Page 26 of 30



Marblehead Corporation's common stock price was a direct result of the nature and extent of

Defendants ' fraud finally being revealed to investors and the market . The timing and magnitude

of the common stock price decline negates any inference that the loss suffered by Plaintiff and

other members of the Class was cause by changed market conditions, macroeconomic or industry

factors or Company-specific facts unrelated to the Defendants' fraudulent conduct.           The

economic loss, i.e., damages, suffered by the Plaintiff and other Class members was a direct

result of Defendants' fraudulent scheme to artificially inflate the Company's common stock price

and the subsequent significant decline in the value of the Company's common stock when

Defendants' prior misrepresentations and other fraudulent conduct was revealed.

       85.     At all times relevant, the defendants' materially false and misleading statements

or omissions alleged herein directly or proximately caused the damages suffered by the Plaintiff

and other Class members. These statements were materially false and misleading because they

failed to disclose a true and accurate picture of First Marblehead's business, operations, and

financial condition, as alleged herein. Throughout the Class Period, defendants publicly issued

materially false and misleading statements and omitted material facts necessary to make

defendants' statements not false or misleading, causing First Marblehead's share price to be

artificially inflated. Plaintiff and other Class members purchased First Marblehead securities at

these artificially inflated prices and caused them the damages complained of herein.


                                              COUNT I

  VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT AND SEC RULE 10b-5

       86.     Plaintiff repeats and realleges each and every allegation contained in the

foregoing paragraphs as if fully set forth herein.

       87.     This Count is asserted against all defendants and is based upon Section 10(b) of



                                                 26
        Case 1:08-cv-10612         Document 1         Filed 04/10/2008     Page 27 of 30



the 1934 Act, 15 U.S.C. § 78j(b), and SEC Rule lOb-5 promulgated thereunder.

       88.     During the Class Period, defendants, singly and in concert, directly engaged in a

common plan, scheme, and unlawful course of conduct, pursuant to which they knowingly or

recklessly engaged in acts, transactions, practices, and course of business which operated as

fraud and deceit upon Plaintiff and the other members of the Class, and failed to disclose

material information in order to make the statements made, in light of the circumstances under

which they were made, not misleading to Plaintiff and the other members of the Class. The

purpose and effect of said scheme, plan, and unlawful course of conduct was, among other

things, to induce Plaintiff and the other members of the Class to purchase the First Marblehead

Corporation's common stock during the Class Period at artificially inflated prices.

       89.     Throughout the Class Period, the First Marblehead Corporation acted through the

Individual Defendants, whom it portrayed and represented to the financial press and public as its

valid representatives. The willfulness, motive, knowledge, and recklessness of the Individual

Defendants are therefore imputed to the First Marblehead Corporation, which is primarily liable

for the securities law violations of the Individual Defendants.

       90.     As a result of the failure to disclose material facts, the information defendants

disseminated to the investing public was materially false and misleading as set forth above, and

the market price of the First Marblehead Corporation's common stock was artificially inflated

during the Class Period. In ignorance of the duty to disclose the false and misleading nature of

the statements described above and the deceptive and manipulative devices and contrivances

employed by said defendants, Plaintiff and other members of the Class relied, to their detriment,

on the integrity of the market price of the Company's common stock in purchasing shares of the

First Marblehead Corporation.     Had Plaintiff and the other members of the Class known the




                                                 27
        Case 1:08-cv-10612          Document 1        Filed 04/10/2008      Page 28 of 30



truth, they would not have purchased said shares or would not have purchased them at the

inflated prices that were paid.

        91.    Plaintiff and the other members of the Class have suffered substantial damages as

a result of the wrongs herein alleged in an amount to be proved at trial.

        92.    By reason of the foregoing, defendants directly violated Section 10(b) of the

Exchange Act and SEC Rule 10b-5 promulgated thereunder in that they: (a) employed devices,

schemes, and artifices to defraud; (b) failed to disclose material information; or (c) engaged in

acts, practices, and a course of business which operated as a fraud and deceit upon Plaintiff and

the other members of the Class in connection with their purchases of the First Marblehead

Corporation's common stock during the Class Period.

                                              COUNT II

                VIOLATIONS OF SECTION 20(a) OF THE EXCHANGE ACT

        93.    Plaintiff repeats and reallages each and every allegation contained in each of the

foregoing paragraphs as if set forth fully herein.

        94.    The Individual Defendants , by virtue of their positions , stock ownership and/or

specific acts described above, were, at the time of the wrongs alleged herein, controlling persons

within the meaning of Section 20(a) of the Exchange Act.

        95.    The Individual Defendants have the power and influence and exercised the same

to cause the First Marblehead Corporation to engage in the illegal conduct and practices

complained of herein.

        96.    By reason of the conduct alleged in Count I of the Complaint, the Individual

Defendants are liable jointly and severally and to the same extent as the Company for the

aforesaid wrongful conduct, and are liable to Plaintiff and to the other members of the Class for




                                                 28
        Case 1:08-cv-10612          Document 1        Filed 04/10/2008      Page 29 of 30



the substantial damages which they suffered in connection with their purchases of the First

Marblehead Corporation's common stock during the Class Period

       WHEREFORE , Plaintiff, on his own behalf and on behalf of the Class, prays

for judgment as follows:

                      (a)      Determining that this action to be a proper class action

              and certifying Plaintiff as class representative under Rule 23 of the Federal Rules

              of Civil Procedure;

                      (b)      Awarding compensatory damages in favor of Plaintiff and the

              other members of the Class against all defendants, jointly and severally, for the

              damages sustained as a result of the wrongdoings of defendants, together

              with interest thereon;

                      (c)      Awarding Plaintiff the fees and expenses incurred in this action,

              including reasonable allowance of fees for Plaintiff's attorneys and experts;

                      (d)      Granting extraordinary equitable and/or injunctive relief as

              permitted by law, equity and federal and state statutory provisions sued on

              hereunder; and

                      (e)      Granting such other and further relief as the Court may deem just

              and proper.




                                                 29
       Case 1:08-cv-10612        Document 1            Filed 04/10/2008       Page 30 of 30



                                JURY TRIAL DEMANDED

      Plaintiff hereby demands a trial by jury.


DATED: April 10, 2008

                                            BERMAN, DEVALERIO, PEASE,
                                             TABACCO, BURT & PUCILLO

                                            By:        /s/ Jeffrey C. Block
                                                  Jeffrey C. Block (BBO #600747)
                                                  Leslie Stern (BBO #631201)
                                                  Nathaniel Orenstein (BBO #664513)
                                                  One Liberty Square
                                                  Boston, MA 02109
                                                  Telephone: (617) 542-8300
                                                  Facsimile: (617) 542-1194

                                                              and


                                                  Laurence D. Paskowitz
                                                  Roy L. Jacobs
                                                  PASKOWITZ & ASSOCIATES
                                                  60 East 42nd St.
                                                  46th Floor
                                                  New York, New York 10165
                                                  Telephone : 212-685-0969
                                                  Facsimile : 212-682-3544
                                                  classattorney @ aol.com




                                                  30
    Case 1:08-cv-10612            Document 1-2           Filed 04/10/2008          Page 1 of 1




                                     PLATNTWF'S CERTIFICATE

           The undersigned ("PlaintilT') declares, as to the claims asserted under the federal
securities laws, that:

         1.     Plaintiff has reviewed the complaint of First Marblehead Corp. and certain
other defendants.

         2.      Plaintiff did not acquire the security that is the subject of this action at the
direction of plaintiffs counsel or in order to participate in this private action or any other
litigation under the federal securities laws.

        3.      Plaintiff is willing to serve as a representative party on behalf of a class, including
providing testimony at deposition and trial, if necessary.

        4.       Plaintiff will not accept any payment for serving as a representative party on
behalf of the class beyond the Plaintiffs pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the representation of the class as
approved by the court.

        5.      Plaintiff made the following transactions during the Class Period (August 10,
2006 through April 7, 2008 in the common shares of First Marblehead:

                Purchases                                                            Soles

    Date (s)         Number            Price                 Date(s)            Number             Price
                    of Shares                                                  of Share$

09/25/2007        99.2038           $ 37.68               04/04/2008        100.2625            $ 7.50




         61      During the three years prior to the date of this Certification, Plaintiff has not
sought to serve or served as a representative party for a class in an action filed under the federal
securities laws.

        7.     1 declare under penalty of perjury, this _07_ day of April 2008 that the
information above i s accurate.




                                                             Stephen E. Keller
                                       Case 1:08-cv-10612                               Document 1-3                         Filed 04/10/2008                             Page 1 of 1
 ^JS 44 (Rev.11/04)                                                                 CIVIL COVER SHEET
The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service ofpleadings or other papers as required by law, except as provided
by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use ofthe Clerk of Court for the purpose of =9
the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

 1. (a)         PLAINTIFFS                                                                                              DEFENDANTS
STEPHEN E. KELLER, Individually and on Behalf of All Others                                                             FIRST MARBLEHEAD CORPORATION, INC., JACK
Similarly Situated                                                                                                      KOPNISKY, DONALD R. PECK, JOHN HUPALO, PETER TARR
       (b)     County of Residence of First Listed Plaintiff                Ogemaw Cty., MI                             County of Residence of First Listed Defendant                 Suffolk Cty.
                                       (EXCEPT IN U.S. PLAINTIFF CASES)                                                                                 (IN U.S. PLAINTIFF CASES ONLY)
                                                                                                                              NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE
                                                                                                                                            LAND INVOLVED.


       (C)    Attorney's (Firm Name, Address, and Telephone Number)                                                     Attorneys (If Known)

Jeffrey C. Block, Berman DeValerio Pease, One Liberty Square, Boston,
MA 02109, 617 542 8300
 II. BASIS OF JURISDICTION (Place an °x" in One Box Only)        HI. CITIZENSHIP OF PRINCIPAL PARTIES(Place an "X" in One Box for Plaintiff
                                                                                                                    (For Diversity Cases Only)                                           and One Box for Defendant)
[711         U.S. Government                   IM 3 Federal Question                                                                             PTF      DEF                                           PTF       DEF
                Plaintiff                              (U.S. Government Not a Party)                          Citizen of This State              L1 1     D 1       Incorporated or Principal Place      Q 4      LI 4
                                                                                                                                                                    of Business In This State

02           U.S. Government                   u 4    Diversity                                               Citizen of Another State           O 2       O    2   Incorporated and Principal Place       LI 5      D 5
                Defendant                                                                                                                                              of Business In Another State
                                                        (Indicate Citizenship of Parties in Item III)
                                                                                                              Citizen or Subject of a           O 3        0    3   Foreign Nation                         Q 6       O 6
                                                                                                                 Foreign Count
TV       NATITRF. OF CTTIT (pi-,a "Y";.,n„,n„vn„I,/t
                    i
               ( O ' i It.A<`P                                            TORIS                               I ORFE1I1RII'[,AAI TV                            13AAERI l it                   0111111 61 611      I ^

O    110 Insurance                             PERSONAL INJURY                  PERSONAL INJURY               O 610 Agriculture                     ID 422 Appeal 28 USC 158           Cl   400 State Reapportionment
0    120 Marine                           O     310 Airplane                 O 36' Personal Injury -          0 620 Other Food & Drug               L71 423 Withdrawal                 O    410 Antitrust
O    130 Miller Act                       0     315 Airplane Product              Med. Malpractice            O 625 Drug Related Seizure                   28 USC 157                  O    430 Banks and Banking
O    140 Negotiable Instrument                     Liability                 0 365 Personal Injury -                of Property 21 USC 881                                             Q    450 Commerce
O    150 Recovery of Overpayment          1     320 Assault, Libel &              Product Liability           CI 630 Liquor Laws                       PRO PERT) RIO I II 6            O    460 Deportation
        & Enforcement of Judgment                  Slander                   0 368 Asbestos Personal          LI 640 R.R. & Truck                   II 820 Copyrights                  0    470 Racketeer Influenced and
LI   151 Medicare Act                     71    330 Federal Employers'            Injury Product              Cl 650 Airline Regs.                  LI 830 Patent                              Corrupt Organizations
O    152 Recovery of Defaulted                     Liability                      Liability                   Q 660 Occupational                    0 840 Trademark                    Q    480 Consumer Credit
        Student Loans                     O     340 Marine                    PERSONAL PROPERTY                     Safety/Health                                                      17   490 Cable/Sat TV
        (Excl. Veterans)                  LI    345 Marine Product           O 370 Other Fraud                0 690 Other                                                              0    810 Selective Service
0    153 Recovery of Overpayment                   Liability                 O 371 Truth in Lending                      L AI30R                        "0(1 61 S1CURI IN              10   850 Securities/Commodities/
         of Veteran's Benefits            71    350 Motor Vehicle            L 380 Other Personal             O 710 Fair Labor Jtandards           D    861 HIA (1395ff)                       Exchange
LI   160 Stockholders' Suits              O     355 Motor Vehicle                 Property Damage                   Act                            0    862 Black Lung (923)           O    875 Customer Challenge
Q    190 Other Contract                            Product Liability         0 385 Property Damage            O 720 Labor/Mgmt Relations           0    863 DIWC/DIWW (405(_1)                 12 USC 3410
D    195 Contract Product Liability       O     360 Other Personal                Product Liability           O 730 Labor/Mgmt.Reporting           O    864 SSID Title XVI             O    890 Other Statutory Actions
0    196 Franchise                                 Injury                                                           & Disclosure Act               Cl   865 RSI (405(-)                O    891 Agricultural Acts
        Iii. A1. 1'R(sl'IUtlA                    (]VII. RI(;IIIs              t'I(IxONER PET I I i ON,        CI   740 Railway Labor Act                 II PER U.IAA, ,I IFS          LI   892 Economic Stabilization Act
11 210 Land Condemnation                  O    441 Voting                    Q     510 Motions to Vaca:.      O 790 Other Labor Litigation          O 870 Taxes U.S. Plaintiff         O 893 Environmental Matters
Q 220 Foreclosure                         l7   442 Employment                         Sentence                0 791 Empl. Ret. Inc.                      or Defendant)                 Q 894 Energy Allocation Act
O 230 Rent Lease & Ejectment              Q    443 Housing/                       Habeas Corpus:                    Security Act                    Q 871 IRS-Third Party              C) 895 Freedom of Information
O 240 Torts to Land                               Accommodations             O     530 General                                                           26 USC 7609                         Act
LI245Tort Product Liability               L    444 Welfare                   O     535 Death Penalty                                                                                   O 900AppealofFeeDetermination
LI 290 All Other Real Property            0    445 Amer. w/Disabilities -    71    540 Mandamus & Other                                                                                      Under Equal Access
                                                  Employment                 LI    550 Civil Rights                                                                                          to Justice
                                          D    446 Amer. w/Disabilities -    71    555 Prison Condition                                                                                Q 950 Constitutionality of
                                                  Other                                                                                                                                      State Statutes
                                          O    440 Other Civil Rights


V.     ORIGIN                     (Place an "X" in One Box Only)                                                                                                                                        Appeal to District
                                                                                                        u 4                             5   Transferred from        716                      0    T     Judge from
9) 1         Original
                 Removed from    0 2    0 3
                                                 Remanded from                Reinstated or 171       another district            Multidistrict                                                         Magistrate
                 State Court
             Proceedin g                         A pp ellate Court            Reo p ened              ( s peci fy)                Liti g ation                                                          Jud gment
                          Cite the U.S. Civil St tute under which you are fil) n (Do n t cite juris ^t t^tonal statute , unless diversit ):
                           Plaintiffs bring t h is action pursuant to Se tlons 10(b), and 2 0(a) of the E xchange Act, 15 U.S.C.                                                                       § 78j(b) and 78t
VI. CAUSE OF ACTION
                          Brief description of cause;
                                                  Securities Class Action for Violation of Securities Exchange Act of 1934
VII. REQUESTED IN                                     CHECK IF THIS IS A CLASS ACTION                              DEMAND $                                      CHECK YES only if demanded in complaint:
         COMPLAINT:                                   UNDER F.R.C.P. 23                                                                                          JURY DEMAND:                10 Yes       O No

VIII. RELATED CASE(S)
                                                     (See nst actions).
             IF ANY                                                          JUDGE                                                                      DOCKET NUMBER

DATE                                                                              SIGN'          OF A'".° V 'TE     (   2BCORD

     04/10/2008
FOR OFFICE USE ONLY


     RECEIPT #                         AMOUNT                                        PPLYING IFP                                      JUDGE                                MAG. JUDGE
                      Case 1:08-cv-10612                 Document 1-4                 Filed 04/10/2008               Page 1 of 1
                                                          UNITED STATES DISTRICT COURT
                                                           DISTRICT OF MASSACHUSETTS

                                                                    Keller v. First Marblehead Corporation, Inc.
1. Title of case ( name of first party on each side only)



2.   Category in which the case belongs based upon the numbered nature of suit code listed on the civil cover sheet . (See local
     rule 40 . 1(a)(1)).

                 1.          160 , 410, 470 , 535, R. 23, REGARDLESS OF NATURE OF SUIT.

                 II.         195, 196, 368 , 400, 440 , 441-446 , 540, 550 , 555, 625 , 710, 720 9 730,   "Also complete AO 120 or AO 121
                             740, 790 , 791, 820*, 830*, 840 *, 850, 890 , 892-894, 895, 950 .             for patent , trademark or copyright cases

                 III.        110 , 120, 130 , 140, 151 , 190, 210 , 230, 240, 245, 290, 310,
                             315, 320 , 330, 340 , 345, 350 , 355, 360 , 362, 365 , 370, 371,
                             380, 385 , 450, 891.

                 IV.         220 , 422, 423 , 430, 460, 480, 490 , 510, 530 , 610, 620 , 630, 640 , 650, 660,
                             690, 810 , 861-865 , 870, 871 , 875, 900.

                 V.          150, 152, 153.


3.   Title and number, if any, of related cases. (See local rule 40.1(g)). If more than one prior related case has been filed in this
     district please indicate the title and number of the first filed case in this court.



4.   Has a prior action between the same parties and based on the same claim ever been filed in this court?
                                                                                                YES                NO

5.   Does the complaint in this case question the constitutionality of an act of congress affecting the public interest ?               ( See 28 USC
     §2403)
                                                                                                YES                NO      /
     If so, is the U.S.A. or an officer, agent or employee of the U.S. a party?

                                                                                                YES   C]           NO

6.   Is this case required to be heard and determined by a district court of three judges pursuant to title 28 USC §2284?

                                                                                                YES                NO

7.   Do all of the parties in this action , excluding governmental agencies of the united states and the Commonwealth of
     Massachusetts ("governmental agencies "), residing in Massachusetts reside in the same division ? - (See Local Rule 40.1(d)).

                                                                                                YES                NO

                 A.          If yes , in which division do all of the non-governmental parties reside?

                             Eastern Division                           Central Division                           Western Division

                 B.          If no , in which division do the majority of the plaintiffs or the only parties , excluding governmental agencies,
                             residing in Massachusetts reside?


                             Eastern Division        /                  Central Division                           Western Division

8.   If filing a Notice of Removal - are there any motions pending in the state court requiring the attention of this Court ? ( If yes,
     submit a separate sheet identifying the motions)

                                                                                                YES                NO


(PLEASE TYPE OR PRINT)
ATTORNEY 'S NAME             Jeffrey C. Block

ADDRESS          Berman DeValerio Pease, One Liberty Square, Boston, MA 02109 617 542 8300
TELEPHONE NO.              617 542 8300

                                                                                                                         (CategoryForm.wpd - 5/2/05)

								
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